Univ. of  in.  Library 

51 — —  wsssm  

**lt?  

i  EEPORT 


Oak  Street 
UNCLASSIFIED 


OF 


H.  M.  THOMPSON, 

(ACCOUNTANT     TO     THE     BOARD    OF    RAILROAD  COMMISSIONERS, 
STATE   OF    NEW  YORK,) 

SPECIAL  EXPERT  ACCOUNTANT, 

APPOINTED  BY 

WM.   A.   BOOTH,  ARBITRATOR, 

UNDER  THE  CONTRACT  BETWEEN  THE 

NEW  YORK  &  SEA  BEACH  RAILWAY  CO. 


wm.  o.  Mcdowell, 

FOR  SERVICES. 


New  York: 

MARTIN    B.  BROWN,  PRINTER    AND  STATIONER, 
Nos.  49  and  si  Park  Place. 

t  885.  v. 


1 


EEPORT 

OF 

H.  M.  THOMPSON, 

ACCOUNTANT     TO     THE     BOARD    OF     RAILROAD  COMMISSIONERS, 
STATE   OF    NEW  YORK.) 

SPECIAL   EXPERT  ACCOUNTANT, 

APPOINTED  BY 

WM.   A.    BOOTH,  ARBITRATOR, 

UNDER  THE  CONTRACT  BETWEEN  THE 

NEW  YORK  Sl  SEA  BEACH  RAILWAY  CO. 

AND 

wm.  o.  Mcdowell, 

FOR  SERVICES. 


New  York: 

MARTIN    B.  BROWN,  PRINTER    AND  STATIONER. 
Nos.  49  and  51  Park  Place. 

1885. 


New  York,  November  14,  1885. 


Wm.  A.  Booth,  Esq.,  New  York  City  : 

Dear  Sir — Under  your  authority,  as  Arbitrator  in  the  matter 
of  Mr.  Wm.  O.  McDowell  vs.  New  York  and  Sea  Beach  Railway 
Co.  for  settlement  of  accounts,  you  appointed  me  to  make  an 
examination  of  the  affairs  of  that  company  for  the  year  ending 
September  30,  1885,  and  report  the  result  to  you.  In  pursuance 
of  that  appointment  I  have  made  the  examination  and  beg  to 
present  the  following 

REPORT : 

October  1,  1884,  to  September  30,  1885. 

RECEIPTS. 

Earnings  from  freight  traffic   $1,788  66 

"  passenger  traffic   94,126  81 

Earnings  from  steamboats,  as  follows  : 

Received  from  Stephens  &  Condit  for  charter  of 

boats   $5,891  83 

Received  from  proportion  of  ticket  sales   3,167  61 

Received  from  Manhattan  Steamboat  Co.  for 

wharfage   150  00 

Received  from  sundry  parties  for  dock  rent 

and  wharfage   1,537  50 

Received  from  charter  of  boats   6,976  66 

sundries  :   17  85 

 17,741  45 

Received  from  rents  and  privileges  of  terminal  prop- 
erty, as  per  annexed  schedule  marked  "A". . .    $64,252  84 
L<0  Less  notes  taken  for  part  still  unpaid . .    $28,572  24 

L-]      Less  allowances   572  50 

  29,144  74 

  35,108  10 


QJ 


Total  cash  receipts  for  the  year 


$148,765  02 


4 


EXPENSES. 

Operating  railroad,  as  per  annexed  Schedule  "  B  "   $94,817  22 

Operating  boats,  as  follows: 

Pay-roiis   *  *'q13  5o 

Board  of  crews   ^  f 

Repairs,  charters,  etc  54,795  46 

Repairs,  expenses,  etc.,  of  terminal  property,  as  follows  : 

Sea  Beach  Palace  ; 

Sea  Beach  Palace  Hotel   2,01d  61 

Sea  Beach  Palace  Rink   2,dbb  9d 

Sea  Beach  Palace  Restaurant  and  Bar   313  25 

Electric  light  •   f 91  84 

Miscellaneous   1,d4U  16  154  99 

Interest :  „AA  AA 

Bonded  debt   00 

Mortgages   1/74^ 

$15,747  97 

Interest  and  discount  on  notes,  loans,  etc   5,729  68 

  2,50a  01 

iaxes-    23,982  66 

Total  expenses  for  the  year  _  $189,750_33 

Total  cash  receipts  for  the  year  as  shown   $148, 765  02 

Total  expenses  for  the  year  as  shown   ___  

Apparent  loss  for  the  year  ^40^985JU 

Charges  have  been  made  to  construction  and  equipment  as  per  annexed 
schedule  marked  "  C."  . 

For  additions  and  betterments  to  railroad   to 'ia*  35 

For  additions  and  betterments  to  steamboats   _ 

$08,137  71 


I  have  examined  the  vouchers  for  all  charges  and  founder 
several  cases,  distributions  made  to  operating  expenses  whic 
ought  to  have  been  made  to  construction,  and  vice  versa,  but  ou 
about  offset  the  other,  so  that  I  did  not  consider  it  necessary  t 
redistribute  such  items. 


Thompson,  H 


a 


Report, . ..under  the  contract 
between  the  Kew  York  &  Sea  Beach  rails 
way  co.  and  Wm.  0.  BcDowell,  for 
services.     New  York,  Brown,  1885 # 


*4 


5 


It  will  be  observed  that  a  portion  of  the  apparent  loss,  as  stated 
above,  consists  of  the  unpaid  notes,  amounting  to  $28,572.24.  So 
far  as  these  notes  may  be  paid,  the  loss  would  be  reduced. 

I  understand  that  large  improvements  were  made  by  tenants 
to  the  various  properties  under  lease,  in  the  expectation  of  an 
increased  excursion  traffic ;  but  the  withdrawal  of  the  boats  from 
the  line,  just  at  the  opening  of  the  season,  prevented  the  realiza- 
tion of  a  profitable  business  as  anticipated,  and  thereupon  many  of 
the  lessees  refused  to  pay,  and,  in  some  cases,  where  certain  privi- 
leges were  leased,  such  as  music  on  boats,  etc.,  the  lessees  not  only 
refused  to  pay  the  notes,  but  claimed  damages  against  the  Com- 
pany, which,  in  some  instances,  were  allowed  and  paid.  The  value 
of  improvements  made  by  lessees,  as  referred  to,  would  be  claimed 
as  offsets  to  amounts  due  the  Company  by  them,  inasmuch  as  the 
policy  of  the  Company  was  altered  after  the  leases  were  made,  by 
which  change  the  lessees  claim  they  suffered  damage  to  their 
business.  In  view  of  this  fact,  as  well  as  the  dissolution  of  the 
partnership,  all  improvements  made  to  property  of  the  Company 
by  others  than  the  Company  (which,  of  course,  enhances  the  value 
and  increases  the  income  to  be  derived  in  the  future)  is  fairly  a 
good  asset  in  which  both  parties  to  the  contract  (Mr.  McDowell 
and  the  Railroad  Company)  have  an  interest,  and  should  be  taken 
into  account  in  arriving  at  the  net  profits  for  the  year. 

As  appears  by  the  books,  the  traffic  over  the  boats  of  the 
Staten  Island  Rapid  Transit  Company  (from  foot  of  Whitehall 
street)  from  June  1  to  September  30,  1885  (during  which  period 
the  boats  of  the  Sea  Beach  Railroad  Company  did  not  run  be- 
tween New  York  and  Bay  Ridge),  produced  a  revenue  of 
$43,528.20  ;  this,  of  course,  would  have  gone  to  swell  the  receipts 
of  this  Company,  had  its  boats  been  running,  at  but  a  small  in- 
crease of  cost  beyond  what  is  already  charged  to  "operating 
steamboats.'' 

To  furnish,  as  desired  by  you,  comparisons  of  the  year  now 
spread  before  you,  with  the  doings  of  former  years,  I  have  used 
the  figures  as  given  by  the  Company  in  its  annual  report  each 
year  to  the  State,  which,  being  verified  as  required  by  law,  will 
of  course  be  accepted  as  authentic : 


6 


October  1,  1881,  to  September  30,  1882. 

Gross  earnings  from  passenger  traffic   $27,462  67 

Gross  earnings  from  freight  traffic   140  00 

Receipts  for  rents  and  privileges   2,972  28 


Operating  expenses. 


Net  earnings  from  operation. 
Deduct  interest  paid  


Deficit  for  the  year  _ 

Cost  of  operating  was  98.84  per  cent,  of  earnings. 

October  1,  1882,  to  September  30,  1883. 

Gross  earnings  from  passenger  traffic   $39,187  60 

Gross  earnings  from  freight  traffic   30  30 

Receipts  for  rents  and  privileges   16,650  52 


$30,574  95 
30,222  69 

$352  26 
1,230  08 

$877  82 


Operating  expenses 


$55,868  42 
38,811  43 


Net  earnings 


from  operation   $17,056 


7,225  00 


Deduct  interest  paid  

Surplus  for  the  year   $9>831  99 

Cost  of  operating  was  69.47  per  cent,  of  earnings. 


1882. 

1883. 

Increase  1883  over  1882. 

Operating  expenses  

$30,574  95 
30,222  69 
352  26 
877  82 

$55,868  42 
38,811  43 
17,056  99 

$25,293  47  or      82. 72$ 
8,588  74  or  28.42$ 
16,074  73  or  4,713.77$ 

10,709  81 

9,831  99 

October  1,  1883,  to  September  30,  1884. 

Gross  earnings  from  passenger  traffic   $133,055  52 

Gross  earnings  from  freight  traffic   i^59  5* 

Receipts  for  rents  and  privileges   31,843  91 


Operating  expenses. 


Net  earnings  from  operation. 
Deduct  interest  paid  


$166,658  94 
90,089  92 

$76,569  02 
17,105  08 


Surplus  for  the  year. 


$59,463  94 


7 


Cost  of  operating  was  54.05  per  cent,  of  earnings. 


1888. 

1884. 

Increase  1884  over  1883. 

Gross  earnings  

Net  earnings  

$55,868  42 
38,811  43 
17,056  99 
9,831  99 

$166,658  94 
90,089  92 
76,569  02 
59,463  94 

$110,790  52  or  198.38^ 
51,278  49  or  132.12^ 
59,512  03  or  348. 90# 
49,631  95  or  504.69^ 

October  1,  1884,  to  September  30,  1885. 

Gross  earnings  from  passenger  traffic   $94,126  81 

Gross  earnings  from  freight  traffic   1,788  66 

Receipts  for  rents  and  privileges    35,108  10 

Newark  ticket  sales   $3,167  61 

Charter  of  boats,  wharfage,  etc   14,573  84 

 17,741  45 

 $148,765  02 

Operating  expenses   168,272  68 

Deficit  from  operation   $19,507  66 

Add  interest  paid   21,477  65 

  $40,985  31 


Total  deficit  for  the  year  

Cost  of  operating  was  113.11  per  cent,  of  earnings. 


1884. 

1885. 

Operating  expenses. . 
Net  earnings  

$166,658  94 
90,089.92 
76,509  02 
59,463  94 

$148,765  02 
168,272  68 
19,507  66 
*40,985  31 

Decrease,  1885  under  1884,  $17,893  92  or  10.73* 
Increase,  1885  over    1884,   78,182  86  or  86.78* 
Decrease,  1885  under  1884,   96,076  68  or  125.48* 
Decrease,  1885  under  1884,  100,449  25  or  168.92* 

*Deficit. 


The  foregoing  results  of  the  doings  of  the  respective  years 
present  the  following  facts  : 

In  1882  the  net  earnings  from  operation  were  $352.26 ;  the 
operation  cost  98.84  per  cent. 

In  1883  the  net  earnings  from  operation  were  $17,056.99  ; 
the  operation  cost  69.47  per  cent. 

In  1884  the  net  earnings  from  operation  were  $76,569.02 ; 
the  operation  cost  54.05  per  cent. 

In  1885  the  deficit  from  operation  was  $19,507.66,  and  the 
operation  cost  113.11  per  cent. 


8 


Jn  1885  the  reduction  in  passenger  traffic  under  1884  was 
$35,761.08  ;  the  net  deficit  was  reduced  to  $19,507.66  by  increased 
income  from  rents  and  privileges,  together  with  receipts  from 
steamboat  charters,  etc. 

Thus  we  see  that  the  management  of  1883  and  1884  was  very 
successful,  increasing  the  income  from  operation  from  $352.26  to 
$76,569.02  and  reducing  the  cost  of  securing  such  earnings  from 
98.84  per  cent,  to  54.05  per  cent. 

In  1885  the  policy  of  the  company  was  changed  and  the  boats 
were  withdrawn,  and  we  find  a  reversion  of  the  success  of  1&83 
and  1884,  producing  a  deficit  in  operation  of  $19,507.66  and 
increasing  the  cost  of  operating  from  54.05  per  cent,  to  113.11 
per  cent.  This  showing,  unless  caused  by  uncontrollable  circum- 
stances, would  be  quite  unsatisfactory  to  railroad  managers. 

Taking  therefore  the  results  of  1884  as  a  basis,  with  a  fair 
presumption  that,  if  the  policy  of  the  management  had  remained 
the  same  in  the  year  1885  as  it  was  in  1884,  the  results  would  have 
been  as  follows  : 

The  increase  of  cash  receipts  from  passenger  traffic  alone  in 
1884  over  1883,  was  $93,867.90  or  239.53  percent.;  in  1883 
over  1882  was  $11,724.93  or  42.69  per  cent. ;  making  the  increase 
of  1884  over  1883,  196.84  per  cent,  larger  than  that  of  1883  over 
1882. 

The  increase  of  1885  over  1884  might  justly  be  claimed  as 
equal  to  that  of  1884  over  1883,  viz. :  239.53  per  cent.,  but,  to 
make  a  liberal  allowance  for  all  ordinary  contingencies,  the  in- 
crease without  doubt  would  have  been  as  favorable  to  1885  over 
that  of  1884  as  the  enlarged  increase  of  the  respective  terms 
shown  above,  viz.  :  196.84 percent. 

The  cash  receipts  from  passenger  traffic  in  1884  were   $133,055  50 

Add  196.  84  per  cent,  of  the  same  for  increased  business,  say . .        261,906  44 

And  the  receipts  from  passengers  would  have  been   $394,961  94 

The  operating  expenses  in  1884  were  54.05  per  cent,  of  the 
earnings  and.  as  a  considerable  decrease  in  that  item,  pro- 
portionate with  the  increased  earnings,  would  naturally  fol- 
low, a  moderate  allowance  would  place  the  cost  at  50  per 
cent,  of  the  earnings,  which  is   197,480  97 


Net  earnings  from  passengers  alone  would  have  been 


$197,480  97 


9 


As  stated  heretofore  in  this  report  amounts  due  for  rents  and 
privileges  were  left  unpaid,  owing  to  the  fact  that  the  busi- 
ness of  the  lessees  was  damaged  by  the  withdrawal  of  the 
boats.  If,  therefore,  the  boats  had  been  operated,  and  the 
excursion  traffic  promoted,  the  lessees  would  have  been 
furnished  with  the  means  of  realizing  a  profitable  business, 
and  as  a  consequence  the  rentals  would  have  been  paid. 
It  is  not  unreasonable  then  to  place  the  income  from  this 
source  at  the  amount  which  was  received  by  the  company 
in  note3  and  cash,  as  shown  on  attached  schedule,  marked 


"A,"  say   $64,000  00 

Total  receipts  from  all  sources  would  have  been   $261,480  97 

Deduct  from  this  the  yearly  interest  on  bonded  debt   14,000  00 

And  the  surplus  to  be  divided  between  the  contracting  parties 

would  have  been   $247,480  07 

Mr.  McDowell,  being  entitled  to  i  of  the  net  profit,  his  share  of 

this  would  be   $49,496  19 


The  claim  of  Mr.  McDowell,  for  -J-  interest  in  improvements  to 
property  made  by  lessees,  which  has  been  charged  against  rent 
also  received  from  them,  I  have  referred  to  heretofore  in  this 
report  as  a  fair  item  of  assets  to  be  taken  into  account  as  a  part  of 
his  profit  and  should  be  determined  by  appraisement. 

The  further  claim  of  Mr.  McDowell  to  an  interest  in  the 
rentals  which  may  accrue  to  the  Company  in  future  years  from 
leases  made  under  his  management  cannot  be  considered  in  any 
way  just  or  allowable  ;  some  leases  do  not  expire  for  ten  years  to 
come,  and  one  not  for  more  than  ninety  years  yet ;  they  were 
made  by  Mr.  McDowell  as  manager  of  the  Company's  operations, 
and,  so  long  as  he  remained  with  the  Company  under  contract, 
he  should  receive  his  proportion  of  the  income ;  but,  after  the 
expiration  of  his  contract,  the  Company  can  establish  such  a 
policy  or  change  its  method  of  operations,  so  as  to  make  it  desir- 
able for  the  leases  to  terminate  by  mutual  consent. 

To  sum  up  the  whole  matter  I  show  the  following  : 

The  apparent  loss  on  the  business  of  the  Company  for  year 
ending  September  30,  1885,  is  $40,985.31. 


10 


M,.  McDowell's  *» -^ZTlS  £55 

basis  as  shown  by  me  he  is  entitled  to  $49,496  19. 

His  claim  for  salary  at  $200  per  month  xs  covered  by 


t "  i.         w  i»W  hefore  you  a  full  statement  of  the 
T  hplieve  I  have  now  laid  Dei  ore  qa  i  ft«* 

herein,  as  requested  in  your  communication  to  me. 
Ml  of  which  is  respectfully  submitted. 

....  H.  M.  Thompson, 

(Slgned>  Expert  Accountant, 


11 


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16 


Schedule  "  B.' 

Operating 


Repairs,  track  

' '  roadbed  

' 1  bridges  

"     shops,  docks  and  stations. . . 

' '  locomotives  

' '  cars  

conductors  and  brakemen  

engineers  and  firemen  

Fuel  for  locomotives  

Oil  and  waste  

Water  supply  

Train  supplies  

' '  expenses  

Wages,  station  agents  and  clerks 

Labor  at  stations  

Station  supplies  

Watclimen,  flagmen  and  switchmen . 

Contingencies  

Salaries,  general  officers  and  clerks. . 
General  office  expenses  and  supplies. 

Stationery  and  printing  

Advertising  

Legal  expenses  

Loss  and  damage,  freight,  etc.  

' '  persons  . ,  

Insurance  

Telegraph  maintenance  


Material, 
Expenses, 
etc. 


$1,609  04 

'21803 
4,026  80 
2,451  78 
705  11 


10,890  49 
2,031  72 
2,067  15 
487  65 


771  00 


23  65 


3,729  05 
2,999  85 
7,691  08 
3,185  73 
47  25 
1,677  13 
2,174  25 
9  25 


Wages. 


$2,310  50 
2,765  03 

1,260*32 
1,889  83 
1,294  00 
3,409  84 
6,327  02 


543  41 
8,001  71 
854  86 

7,387*74 

11,737*59 


$46,818  37 


$47,998  85 


Schedule  "  B  "  referred  to  in  foregoing  report. 

(Signed)  H.  M.  Thompson. 


17 


Schedule  "  C." 
Construction,  October  1,  1884,  to  September  30,  1885. 


Material,  etc. 


Ballasting,  grading  and  masonry 

Bridges  (contract)  

Superstructure  and  rails   

Land  

Passenger  and  freight  stations  . 

Engine  and  car  houses  

Shops,  machinery  and  tools  

Locomotives  

Passenger  cars  


Rebuilding  steamer  "  Sylvan  Grove 


$477  90 
6,820  64 
5,297  06 
4,000  00 
1,976  52 
1,033  72 
19  20 
12,270  84 
3,050  00 


$34,945  88 


Wages. 


$9,779  98 


1,243  50 


$11,023  48 


Total. 


$10,257  88 
6,820  64 
5,297  06 
4,000  00 
3,220  02 
1,033  72 
19  20 
12,270  84 
3,050  00 


$45,969  36 
22,168  35 


,137  71 


Schedule  "  C  "  referred  to  in  foregoing  report. 

(Signed)  H.  M.  Thompson, 


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